Vertical mergers combine two or more companies that operate
at different levels in the same supply chain. A primary goal of the new
Vertical Merger Guidelines is to help the agencies identify and challenge
competitively harmful mergers while avoiding unnecessary interference with
mergers that either are competitively beneficial or likely will have no
competitive impact on the marketplace. To accomplish this, the guidelines
detail the techniques and main types of evidence the agencies typically use to
predict whether vertical mergers may substantially lessen competition. The
Guidelines will help businesses, antitrust practitioners and other interested
persons by increasing transparency into the agencies’ principal analytical
techniques, practices, and enforcement policies for evaluating vertical
transactions.
The new Vertical Merger Guidelines reflect the agencies’
analysis of vertical mergers. The revised guidelines:
- Explain that mergers often present both horizontal and vertical elements, and the agencies may apply both the Horizontal Merger Guidelines and the Vertical Merger Guidelines in their evaluation of a transaction, as part of a fact-specific process that involves a variety of tools to determine whether a merger may substantially lessen competition.
- Clarify that its analytical techniques, practices, and enforcement policies apply to a range of non-horizontal transactions, including strictly vertical mergers, “diagonal” mergers, and vertical issues that can arise in mergers of complement.
- Clarify that when the agencies identify a potential competitive concern in a relevant market, they will also specify one or more related products. A related product is a product or service that is supplied or controlled by the merged firm and is positioned vertically or is complementary to the products and services in the relevant market.
- Provide detailed discussions, including multiple diverse examples, of the “raising rivals’ costs” and “foreclosure” theories of harm. In recent decades, these theories of harm have been the principle theories investigated in merger reviews.
- Identify conditions under which a vertical merger would not require an extensive investigation, because the merger does not create or enhance the merged firm’s incentive or ability to harm rivals.
- Emphasize that analyzing efficiencies is an important part of reviewing vertical mergers.
- Explain in detail the analysis of the elimination of double marginalization (“EDM”), which economists emphasize is a frequent procompetitive result of vertical transactions.
The guidelines address the usage
of confidential information in vertical mergers:
b. Access to Competitively Sensitive Information
In a vertical merger, the transaction may give the combined
firm access to and control of sensitive business information about its upstream
or downstream rivals that was unavailable to it before the merger. For example,
a downstream rival to the merged firm may have been a premerger customer of the
upstream firm. Post-merger, the downstream component of the merged firm could
now have access to its rival’s sensitive business information. In some
circumstances, the merged firm can use access to a rival’s competitively
sensitive information to moderate its competitive response to its rival’s
competitive actions. For example, it may preempt or react quickly to a rival’s
procompetitive business actions. Under such conditions, rivals may see less
competitive value in taking procompetitive actions. Relatedly, rivals may
refrain from doing business with the merged firm rather than risk that the
merged firm would use their competitively sensitive business information as
described above. They may become less effective competitors if they must rely
on less preferred trading partners, or if they pay higher prices because they
have fewer competing options.
The guidelines are available,
here.
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